In simple, reinsurance is insurance for insurers. It is a risk mechanism tool used by an insurance company to increase its underwriting capacity and protect it from any large and complex losses.
In other words, when insurers cannot retain risks, they reinsure to reduce their risks accumulation.
Moreover, reinsurance also provides technical support to an insurer to keep up with demand for a wide range of insurance requirements in a volatile and unpredictable world.
But despite, being crucial in risk and capital management, not much is known about reinsurance outside the insurance sector. Yet, reinsurance remains the lynchpin cog in an insurance system.